Trump and Putin Tear Up the Rulebooks

The bigger point is that there was—and still is—a set of trade rules that set certain standards, particularly with regard to subsidies. China, with its insatiable appetite for markets and trade, flouted the rules. If Trump is serious about walking away from the WTO and adopting a protectionist policy, Xi Jinping, China’s president and communist party leader (who has just had himself elected for life), must be in heaven. Trump has handed him a silver platter, even if the United States slaps tariffs on China’s steel imports. The United States is walking away from the free trade rules that it made.

The European Union is at a crossroads. With German Chancellor Angela Merkel’s new and fourth coalition now in place, she and French President Emmanuel Macron have the chance to move Europe forward through deeper economic and political integration.

Failing that, there is a high probability that the EU could become an unwieldy collection of states, eschewing solidarity, ignoring the unprecedented challenges of the digital revolution, and ceding influence to China. Russia, in the meantime, will remain the big disrupter.

More integration may be anathema to several of the EU’s member states that crave more sovereignty. But three major developments should prove why integration is a necessity if the EU is to survive as a viable political and trading bloc. They involve Russia, the United States, and China.

By annexing Crimea four years ago, and his subsequent invasion of parts of eastern Ukraine, Russian President Vladimir Putin tore up the rulebook for European security. That book, based on the 1975 Helsinki Final Act, which the former Soviet Union signed up to, guaranteed the territorial integrity of borders.

Psychologically and politically, the Helsinki Accords went beyond symbolism. When the Berlin War was torn down in November 1989, the newly reunited Germany rushed to reassure its Eastern and Central European neighbors that their borders were inviolable. A quarter of a century later, Putin’s blatant interference in Ukraine rattled the Baltic States and Poland. Borders were no longer sacrosanct. That is why allies along Europe’s Eastern flank sought and obtained reassurances from NATO that they would be defended; that Article 5 was not in jeopardy.

Yet because Russia tore up the rulebook, one of the foundations of the Cold War-era was dismantled. It’s hard to see it being rebuilt. That would require Russia relinquishing its military and political support for the Donbas and returning Crimea to Ukraine. That is not going to happen in the foreseeable future. Cold War and post-Cold War certainty has been replaced by unpredictability.

That’s all the more reason for the Europeans to start thinking and acting strategically, rather than keep second-guessing Putin’s next move.

Rolling over the sanctions that the EU imposed on Russia four years ago has been a remarkable feat of unity. But it doesn’t amount to a strategy. European leaders, particularly Macron and Merkel, have to ask that if sanctions haven’t had the desired effect of changing Putin’s behavior, what other options should be considered.

One is putting a stop to the Nord Stream 2 pipeline. If the EU is serious about energy diversification, supporting more Russian gas flowing to Europe via Germany is counter-productive. The other strategic imperative is a long-term one: supporting Russian civil society in all its forms.

The second development is U.S. President Donald Trump’s decision, in the name of national security, to slap substantial tariffs on steel and aluminum imports. Leaving aside that previous American presidents had imposed unilateral tariffs, what makes the Trump administration different is that it is tearing up the rulebook that the multilateral trading system was built on: a system of values, practices, and norms. It was based on the World Trade Organization, a far from perfect institution whose machinery has become bogged down in disputes and lagging behind economic change, as the Economist recently argued.

The bigger point is that there was—and still is—a set of trade rules that set certain standards, particularly with regard to subsidies. China, with its insatiable appetite for markets and trade, flouted the rules. If Trump is serious about walking away from the WTO and adopting a protectionist policy, Xi Jinping, China’s president and communist party leader (who has just had himself elected for life), must be in heaven. Trump has handed him a silver platter, even if the United States slaps tariffs on China’s steel imports. The United States is walking away from the free trade rules that it made.

And this is the third development. The Europeans and Asian countries understand the implications of Trump’s decision and how it will be exploited by China. But they can act. The EU’s trade commissioner, Cecilia Malström, said the bloc would retaliate by imposing punitive tariffs on American imports. Take a look at the tweets by Malström and Trump. Also look at the most recent Transatlantic Economy 2018 report, an annual survey of jobs, trade, and investment between the United States and Europe.

Written by Daniel S. Hamilton and Joseph P. Quinlan, they show the depth of transatlantic economic ties. Over 54 percent of global investment into the United States comes from Europe, and 64 percent of U.S global investment goes to Europe. American investments in Europe have created 4.7 million jobs; European companies have created 4.3 million jobs in the United States. A trade war is not in the interests of either side.

Trump has since suggested he would exempt Canada and Mexico from the tariffs. In the meantime, the U.S. president is set on renegotiating the North American Free Trade Agreement (NAFTA) trade accord after walking away from the Trans-Pacific Partnership (TPP).

The EU, for its part, might consider forging a relationship with the TPP countries. They need a political and economic counterweight to China. And for that reason, together they need to rescue that rulebook of free trade. Strategically, it could be in Europe’s and Asia’s interests to do so, rather than wait on Trump to tear it up completely.

The dust has a bit settled on Theresa May’s Brexit deal with the EU. It looks like that more people took the chance to read more of it and to compare it, for instance, with a no-deal that no one knows what exactly will mean